Price ceiling,Privatization of Public Utility Services
A presentation on the economic principle of price ceiling and discusses the merits/demerits of privatization of India Posts and Railways
Published on: Mar 4, 2016
Transcripts - Price ceiling,Privatization of Public Utility Services
Rachel Priyanka J 29038
Rahul KR 29039
Ramesh Babu 29040
A price ceiling is the maximum price a seller can legally charge a buyer
for a good or service. Regulators(Govt.) usually set price ceilings.
The regulator establishes the
maximum acceptable prices for the
The regulator periodically reviews the
price cap system. It may change the
ceiling formula or review the profit
conditions of a firm.
The regulator may adjust a ceiling
based on changes in industry prices
The regulator may group services into
baskets and set an overall price ceiling
for them, or it might set a ceiling for
each individual service.
Doctrines of Price
Non-Binding Price Ceiling Binding Price Ceiling
No adverse effects on the market
Supply drops causing a Shortage
(leads to Black Market)
State-Owned Enterprises(SOEs) performance are very difficult to bring about and
even harder to sustain.
Govt is service oriented and private firms are results oriented
Alternative service delivery techniques can be employed to maximize efficiency
and increase service quality.
1. Contracting or Outsourcing. - Retain managerial and policy control on service
delivery. (e.g. Contracting catering and pantry services).
2. Management Contracts - Operation of a facility can be contracted (e.g
Contracting Parking lots etc.).
3. Public-Private Competition - Public services are opened up to competition, in-
house public organizations are allowed to participate in the bidding process (e.g
Privatization of Telecom sector in India).
4. Franchising - A private firm is given the exclusive right to provide a service within
geographical area (e.g Franchising Power distribution and fee collection in Mumbai).